Construction enjoys marvellous May

The Australian construction sector has continued its impressive run of growth in May, with the Australian Performance of Construction Index revealing a fourth consecutive month of expansion.

The index, compiled by the Ai Group and the Housing Industry Association, increased by 4.8 points to 56.7 points (readings above 50 indicate expansion). This represents the fastest rate of expansion for the industry since September 2014.

Across the four sub-sectors of the index (houses, apartments, commercial and engineering) it was the apartments and commercial construction sub-sectors that were mostly responsible for the increase, recording 13.2 and 12 point increases respectively.

The engineering sub-sector also jumped back into growth with a gain of 4.3, which is the sub-sector’s strongest rate of growth in 9.5 years. The Ai Group says post-mining infrastructure projects are on the rise.

"Much of the construction industry was seeing stronger activity in May, reflecting the very high building approvals numbers we have seen of late," Ai Group chief economist Julie Toth says.

"Although housing activity was down this month, the gap was more than filled by apartment and multi-unit dwelling construction.

"In the engineering and commercial construction sectors, a stronger flow of work from big transport infrastructure projects and from commercial projects relating to tourism, healthcare and manufacturing seems to be countering the down-swing in mining-related projects," Toth continues.

Representatives from the Housing Industry Association say the lift in apartment construction will go some way toward easing housing affordability in the major cities.

"A record number of new apartments were commenced across Australia during 2016 and work on these will continue to support on-the-ground activity in residential building for much of this year," HIA senior economist Shane Garrett says.

"There are already signs that the large volume of newly-built apartments becoming available for occupation in Sydney and Melbourne is taking some of the edge out of dwelling price inflation in Australia's two largest cities – good news from an affordability perspective," Garrett says.